Our Oakville OfficeOur Ottawa OfficeOur Toronto OfficeOur Barrie Office
 
Home > Reading Room
Increase Font Size Option 5 Reset Font Size Option 5 Decrease Font Size Option 5
CONDOCENTRIC: DIRECTORS AND OFFICERS LIABILITY INSURANCE - Claims Made Form

With the increasing responsibility being placed on directors and officers of residential condominium corporations, there appears to be an increasing number of questions surrounding the Directors and Officers’ Liability (“D&O Liability”) coverage provided under a condominium corporation’s policy of insurance.

The Condominium Act, 1998 (the “Act”) provides that a condominium corporation shall maintain D&O Liability insurance “if reasonably available”. While extreme circumstances could exist to hinder the availability of such coverage, coverage is generally available by almost all writers of residential condominium insurance.

Who is covered under a directors and officers’ liability form?

It is not unusual for directors to feel that once they have left the Board, they are no longer protected under the D&O Liability coverage. Most standard D&O Liability wordings protect, past and present directors and officers, individually and collectively for wrongful acts, subject to any exclusions or limitations. Condominium corporations should ensure that coverage extends to cover members of any committee created and acting under the authority of the Board, as well as any employees of the condominium corporation while performing duties in accordance with the directions of the Board.

“Claims Made Basis” vs. “Occurrence Basis”

Property and General Liability coverage is written on an “Occurrence Basis”, meaning that the policy, which is in force at the time of the occurrence giving rise to the loss, is the policy of insurance that responds (i.e. if a fire “occurs” on July 10, 2002, the policy that is in effect on that date will pay for any resultant damage).

D&O Liability, by contrast, is written on a “Claims Made Basis”, meaning that if a Board is drawn into a lawsuit as a result of an incident which occurred 2 years ago, the policy that is in force at the time the “claim is made” against the Board is the policy that responds (not the policy that was in place 2 years ago).

Note: This coverage is subject to the fact that the Board had no knowledge of any incident, which would give rise to a claim, prior to placing the coverage with the existing insurer. Past Board members should take comfort in the knowledge that they can be assured of coverage despite any coverage, or lack thereof, in effect when the incident occurred, and for which the Board is now being sued.

Limitation of Coverage

All coverage provided under any policy of insurance contains exclusions and limitations. Dishonest, fraudulent, criminal, and deliberate acts of directors and officers are all specifically excluded from coverage under the D&O Liability coverage. In addition to numerous other exclusions, there would be no coverage available to any director and/or officer gaining any personal profit, remuneration or advantage to which he/she was not legally entitled.

Depending on the insurance company and the wordings provided, coverage can vary from one company to the next. Special attention should always be paid to the specific limitations and exclusions contained in the Policy.

From “Common Elements” Spring 2002
By Mark Shedden F.C.I.P.
Atrens-Counsel Insurance Brokers Inc.



All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

www.elia.org

© Elia Associates Professional Corporation, All Rights Reserved.

 
CONDOCENTRIC: INSURANCE: Case Law Revisited

CASE 1: Miluzzi v. York Condominium Corporation No. 60 (1996 – Small Claims Court)

The facts in this case are straightforward: The plaintiff’s unit was flooded; the plaintiff’s insurer repaired the damage and sought recovery from York Condominium Corporation No. 60. The primary issue was whether condominium insurance can exist with a deductible, and, if yes, what amount of deductible was reasonable.

The old Condominium Act was silent on the issue of insurance deductible. The Condominium Act, 1998 expressly provides that condominium insurance can exist with a deductible, and that, unless it is possible to pass on the responsibility to the unit owner, the deductible is a common expense of the condominium corporation.

Miluzzi remains relevant in providing guidance as to the amount of the deductible. Specifically, Miluzzi provides that a reasonable deductible should be expected by the unit owners and that the amount of the deductible can be determined in light of the Corporation’s prior history of claims under the policy. Miluzzi also provides that unit owners cannot object to the deductible amount provided the Corporation has not acted in an arbitrary or capricious manner.

The reasoning used in Miluzzi pertaining to the deductible amount was expressly adopted in the later decision of Stevens v. Simcoe Condominium Corporation No. 60.

CASE 2: Stevens v. Simcoe Condominium Corporation No. 60 (1999 – Ontario Court of Appeal)

Under the old Condominium Act, Stevens was the leading decision dealing with the recovery of an insurance deductible from unit owners. The facts of the case were relatively simple: the unit owner installed an air conditioning unit; water escaped from the air conditioning unit causing damage to another unit; the cause of the water escape was unknown; and negligence was not proven.

The Court found that, from a policy standpoint, the forced sharing of the deductible deprives the owners as a group of the disciplining effect that a deductible has upon claims. The Court went on to hold that the issue of liability for deductible is determined:

a. in accordance with the provisions of the declaration, by-laws and rules of the condominium corporation (defining the rights and obligations of the owners and the corporation); and

b. in accordance with the prevailing practice in the insurance industry, which is to shift the deductible portion of the loss to the party, causing the loss as a means of disciplining insurance claims.

The continued relevance of Stevens is not clear in light of section 105 of the new Act, and will likely require guidance from the Courts.

The new Act is relatively clear that, where an owner’s unit is damaged through the acts or omissions of that owner or the resident, the deductible amount is recoverable and may be added to the common expenses for that unit. The Act is also relatively clear that the ability to recover the deductible can be expanded to include circumstances where the damage was not caused by any act or omission of the corporation (this is consistent with Stevens as negligence was not proven on the part of the owner or resident).

The problems arise when one considers damage caused to other units or the common elements. Using the reasoning in Stevens, and looking to the condominium corporation documents for applicable authority, the deductible is recoverable. Until the Courts rule otherwise, it would likely not be unreasonable to conclude that the reasoning in Stevens, continues to apply and that the provisions contained in a condominium corporation’s declaration, by-laws and rules should govern recovery of the insurance deductible.

CASE 3: Peel Condominium Corporation No. 16 v. Vaughan (1996 – Ontario Court Gen. Div.)

This case stands for the premise that the waiver of subrogation, which exists between a condominium corporation and unit owners, does not extend to rental tenants. This premise and the reasoning of the Court should continue to apply under the Condominium Act, 1998.

At issue was the right of the Corporation’s Insurer to bring a subrogated claim against a tenant (not the owner) residing in a unit to recover damages following a fire caused by the tenant’s negligence.

The Court found that the Condominium Act, declaration and by-laws put in place a scheme to deal with damage caused by fire. The Corporation obtained coverage on behalf of itself and the owners, and they waived subrogation rights against each other. The Court held that (1) nothing in the Condominium Act affected a tenant’s risk, (2) the word "owner" in the documents and the Condominium Act did not include tenants and was not ambiguous, and (3) tenants are not covered by the Corporation’s insurance.

From “Common Elements” Fall 2002
By Richard A. Elia
B. Comm. LL.B., LL.M. (ADR), A.C.C.I.


T:  416-446-0800 ext 801
F:  416-446-0804
E:  richard@elia.org
Toll-Free: 1-866-446-0811
 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

www.elia.org

© Elia Associates Professional Corporation, All Rights Reserved.

 
CONDOCENTRIC: The Standard Unit By-Law: What it is - NOT!

From inquiries that I continue to receive, it appears that there is still some general misunderstanding concerning the purpose and limitations of the standard unit by-law.

A Standard Unit By-law IS:

1. A means of determining what constitutes an improvement to a unit (and might include floor coverings, appliances, wall coverings, etc…)

2. A means of determining a condominium corporation’s responsibility to insure improvements to a unit and, if insurance coverage exists, to repair improvements after damage.

A Standard Unit By-law IS NOT:

1. A way to alter the allocation of "maintenance" responsibilities between a condominium corporation and the unit owners;

2. Except with regard to improvements to a unit, a way to alter the allocation of "repair after damage" responsibilities between a condominium corporation and the unit owners.

From “Common Elements” Fall 2008
By Richard A. Elia
B. Comm. LL.B., LL.M. (ADR), A.C.C.I.


T:  416-446-0800 ext 801
F:  416-446-0804
E:  richard@elia.org
Toll-Free: 1-866-446-0811
 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

www.elia.org

© Elia Associates Professional Corporation, All Rights Reserved.

 
«StartPrev121122123124125126NextEnd»

Page 125 of 126

 All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

www.elia.org  

© Elia Associates Professional Corporation, All Rights Reserved.